In what is sure to be my most predictable topic since writing this column, let's talk about discussing the financial ramifications of Hurricane Sandy to our children.
Don't lose sight of what the goal is: to foster a safe environment to discuss money with our young children. In Westport, we had significantly less damage, which is hard to imagine, than most areas. That being said, our challenges in the next few weeks will pale in comparison to other communities.
Let's start with some "good" news, and I realize I'm stretching it. Our electric bill should be 20 percent lighter this month knowing that we've been without power for four or five days. Now don't go and spend all that money just yet; start by asking your child: "Did you ever think about how much money we're saving by not having electricity this week?"
The younger your child, the more interesting the responses will be. Don't be tempted to skip ahead and give them the "but" -- added expenses; you'll have your chance to share the bad news. Give them an opportunity to come up with both sides of the discussion on their own. You might be pleasantly surprised by how your kids put together the puzzle before you jump in to share your family's pocketbook woes with them.
If they don't come to the additional expense side of the equation, gently introduce an open-ended question like:
"How do you think families are dealing with their additional expenses this week?"
You could create a list together of the additional expenses your family has encountered this week:
Eating out because your refrigerator and stove didn't work.
Food you had to throw away because there was no power for the refrigerator.
Hotel room, if you were lucky enough to get one.
Fuel costs to keep those generators going.
Reduced income because you couldn't get into work. And if you aren't paid by the hour, don't think you're off the hook -- I'm sure all of you in the banking industry are starting to hear rumors of "a reduced bonus pool this year" due to the havoc the storm inflicted.
Insurance rates sure to escalate ... maybe not today, but eventually.
Increased utility costs sure to come just like post-Tropical Storm Irene: the extra cost of labor, equipment repairs and landscaping will make sure we're paying our fair share.
Be sure to reinforce that this doesn't mean your family is in financial trouble -- guide the conversation into the importance of having an emergency reserve fund. The historical rule of thumb used to be having six to nine months of living expenses in a secure cash account for unforeseen circumstances. I've personally moved that to 12 months with the clients I consult, but think it's more about the concept than the details for our children.
This unfortunate event is sure to generate many questions from your children; it would be fitting to use it as a springboard to catapult their financial literacy. I hope all my readers are faring well, and be sure to send me the results of these conversations.
Tom Henske is a Westport resident and partner with Lenox Advisors, a wealth management firm with offices in New York and Stamford. His "Money-Smart Kids" appears every other Wednesday. He can be reached at email@example.com.